What the G-7 Infrastructure Initiative Can Offer Southeast Asia

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What the G-7 Infrastructure Initiative Can Offer Southeast Asia

The Partnership for Global Infrastructure and Investment will find a receptive audience in the region, but the full scope of the new initiative remains unclear.

What the G-7 Infrastructure Initiative Can Offer Southeast Asia

Leaders of the G7 nations pose for a photo at Schloss Elmau following their dinner at the G7 Summit in Elmau, Germany, Sunday, June 26, 2022.

Credit: AP Photo/Susan Walsh

This week, during the Group of Seven (G-7) Leaders’ Summit in Germany, U.S President Joe Biden launched the grouping’s foray into economic statecraft, the Partnership for Global Infrastructure and Investment (PGII). The PGII is supported by a commitment of $600 billion from G-7 nations for the construction of global infrastructure by 2027, and aims to support global energy security via climate-resilient infrastructure and soft infrastructural development in the digital economy, among other things. This initiative is in some ways a continuation and expansion of the Build Back Better World (B3W) initiative introduced by Biden last year as a strategic alternative to China’s Belt and Road (BRI).

Although it is still in its preliminary phase, PGII can potentially offer a lot to the Southeast Asian region. Two things could be of particular benefit. Firstly, $600 million will be spent on a global submarine telecommunications cable connecting Southeast Asia to Western Europe via the Middle East. Secondly, the United States, via USAID, will invest $49 million in Southeast Asia to strengthen the region’s power networks, a facet of the program that is eventually expected to gain $2 billion in financing.

The U.S. and its allies are finally realizing how best to engage with Southeast Asian nations: by talking the language of economics. In May, the U.S. launched the Indo-Pacific Economic Framework (IPEF) with the support of seven Southeast Asian countries, despite the absence of many details about the framework. Previously, the long-awaited U.S.-ASEAN Special Summit in May saw the U.S. make a $150 million commitment to the region for maritime cooperation, clean energy, and pandemic management.

For the U.S. and its allies in the G-7, the PGII is a strategic move to fill the global infrastructural gap in the context of an economic downturn prompted by the COVID-19 pandemic and the Russia-Ukraine war. And Southeast Asia has always been receptive to any economic initiative or programs, regardless of who proposes them.

For the newly launched PGII to make the most of things in Southeast Asia, it should “mind the infrastructural gap” while meeting the demand for the development of the digital economy in the region. A 2017 report from the Asian Development Bank (ADB) claims that in order for Southeast Asia’s infrastructure to keep pace with its ongoing growth rate, the region will need infrastructural investment of $184 billion annually; by 2030 it will be reaching $2.7 trillion. However, with regional output this year languishing at around 10 percent below the pre-COVID-19 baseline, Southeast Asian nations are in dire need of the economic boost that infrastructure development would provide.

Southeast Asia is also home to a large and growing digital market that is forecasted to reach $350 billion by 2025. As the recovery phase of the pandemic is ongoing, PGII must also prioritize digital infrastructural support in order to help eliminate the roadblocks that hinder the region’s full digital economic potential. Underdeveloped facilities and technology must be replaced by a solid and advanced infrastructure. The PGII must also work closely in line with ASEAN and its digital blueprint to promote and improve digital connectivity in order to meet the region’s digital economic potential.

Of course, given that the gap in technological infrastructure between the 10 ASEAN  member states is huge, PGII-led developments may end up creating greater inequities and disparities if its implementation is not properly managed.

The U.S. and its allies should bear in mind that the region does not want zero-sum execution on infrastructure. As the BRI is still ongoing in most Southeast Asian countries, the PGII should aim to complement other nations’ initiatives and fill infrastructural gaps that are deemed important to host countries.

Given the region’s growing dependence on China for infrastructural development, the PGII could potentially prove a glad tiding for Southeast Asia, granting it additional space to maneuver between different outside nations in pursuit of their national interest. This has been the case on the region’s approach to 5G technology, where countries have a diverse range of options. Malaysia and Singapore have partnered with Ericsson, Indonesia is tilting towards Huawei’s technology, and Vietnam is collaborating with the non-Chinese 5G developers to produce their own native 5G technology.

Thus, the PGII must aim to produce a competent alternative to the BRI in Southeast Asia, and help fill the infrastructural gap that faces so many nations in the post-pandemic era. Having options is something that the region will appreciate, since the demand for infrastructure is soaring, but national interest remains paramount.

However, it remains to be seen how the PGII will fare, and whether there will be any continuity in U.S. strategic engagement, given the looming U.S. midterm election in November, and the presidential election that will be held in 2024. Otherwise, we might be in for a revival of Donald Trump’s “America First” agenda, which was marked by the U.S. withdrawal from the Trans-Pacific Partnership.

Furthermore, a project of such magnitude has its own host of internal challenges. Implementation is never a walk in the park, but is especially difficult when an initiative involves seven major economies with a multitude of regional interests. China’s BRI has been designed by the state and executed by state-related corporations and thus has been able to deliver results quickly. Whether PGII will be able to achieve the same remains to be seen.

In fact, the enterprise could possibly add up to a half-baked strategy if the G-7 is unable to deliver a proper execution plan. Considering the challenges and political uncertainties of U.S. domestic politics and the complexity of managing the multifaceted interests of every contributing country, the U.S. faces a daunting task.

Southeast Asia nations are firmly focused on the need to bolster their economies, and any initiative that helps advance their interests will be welcomed, as it has done with the BRI and the IPEF. But unless the U.S. is seriously invested in turning the PGII’s plans into a reality, its reliability as an ally and partner will remain in question in the region, at least in the economic domain.

Guest Author

Fikry A. Rahman

Fikry A. Rahman is the Head of Foreign Affairs at Bait Al Amanah, an independent and neutral research institute based in Malaysia that conducts studies and research into governance, democracy, economics, security, and other issues of national importance.

Guest Author

Dr. Abdul Razak Ahmad

Dr. Abdul Razak Ahmad is the Founding Director at Bait Al Amanah, an independent and neutral research institute based in Malaysia that conducts studies and research into governance, democracy, economics, security, and other issues of national importance.